The property was purchased for about $500k about 15 years ago and was never used to generate income. It was used to house the parents and then a sibling of the 3 shareholders (rent free) but now 2 of the shareholders have agreed to give up all their shares to the third shareholder for the property. Because of improper care and significant damage to the home, it is only worth about half of the original purchase price.

So my understanding is since the property was never used to generate income, it does not get depreciated and since no upgrades were made to the home, the basis should just be the original purchase price of $500k. But now that the house is work less than $300k, a loss should be realized on the exchange. Does that seem correct, at least at a 10k foot level?